A Shareable Explainer: What is a Platform Co-op?

by Maira Sutton, Cat Johnson and Neal Gorenflo

The sharing economy held great promise when it first emerged. It was seen as a way to help people build community, reduce unnecessary consumption, and generate extra income. It was based on the brilliantly simple notion that when we share, everybody has more.

But this vision quickly vanished. Tightly controlled, profit-driven corporate platforms corrupted that promise with their brand of transactional “sharing” that all too often depends on externalizing the costs and risks to users and individual service providers — Airbnb hosts and Uber drivers, for example. In addition, those that create most of the value on these platforms usually have no say in how the businesses are operated. Such practices are part and parcel of an effort to grow quickly at all costs, and sometimes with the ambition to establish a global monopoly.

This drive has a number of negative consequences which undermine the admittedly great promise of these services, including poor service, racism, and inadequate safety measures. It also leads to declining trust in these companies as they appear to take advantage of users in order to reap outsized financial windfalls. Uber and Airbnb are among the most well-known examples, but these winner-takes-all “sharing” platforms are emerging in other industries across the globe.

The good news is that there is an alternative — one that places control and ownership of digital services into the hands of its users. It’s called a platform cooperative, or platform co-op. 

Outline

What is a platform co-op?

A platform co-op is a digital platform — a website or mobile app that is designed to provide a service or sell a product — that is collectively owned and governed by the people who depend on and participate in it. That includes those who deliver the underlying service by contributing labor, time, skills, and/or assets. Where corporate “sharing” platforms extract value and distribute it to shareholding owners who seek a return on their investment, platform co-ops distribute ownership and management of the enterprise to its participants — those working for the platform or those using the service.

Platform co-ops bring the longstanding tradition of cooperative enterprise to the online economy. The two key traits that these digital co-ops must realize are democratic control and collective ownership. Some advocates insist that in order to be counted as a platform co-op, an enterprise must uphold the International Co-operative Alliance’s cooperative principles.

What are some examples of platform co-ops?

Even though the concept of a cooperative enterprise is not new, there are still relatively few of them in the digital services industry. Here are three examples of successful platform co-ops.

  • Stocksy is an artist-owned cooperative that sells stock-photography. The co-op is based in Victoria, British Columbia, and is built on the idea that the artists who contribute photos to the site should receive fair pay and have sustainable careers. Artist-members license images to Stocksy and receive 50 percent commission on sales and share any surplus-income at the end of each year. The co-op was created after the founders sold their previous venture, iStock, to Getty Images. By 2014 Stocksy had a revenue of $3.7 million, and over time, it has paid several million dollars in surplus to its artists. (The images used in this article have been purchased from Stocksy.)

  • Modo is a Vancouver-based carsharing co-operative. Member-owners are shareholding members of the co-op, which means they make decisions collectively through voting. It was incorporated in 1997 with just two cars and 16 members. Today, it has more than 16,000 members and a fleet of over 500 sports cars, sedans, trucks, SUVs, vans, and hybrids — all of which are available at $4/hour through their mobile app and website. Modo is the first carshare co-op in North America.

  • Fairmondo is a cooperative online marketplace that is an alternative to eBay and Amazon. It is owned and run by its buyers, sellers, workers, and investors, and sells ethically-sourced products from small fair trade companies. Fairmondo was originally launched in Germany in 2012 as a cooperatively-owned marketplace to promote fair goods and services as well as responsible consumption. The Fairmondo team has created a federated model in which an affiliate can launch a co-op in another country using the Fairmondo brand and platform to serve the local market. The company is currently building Fairmondo UK and plans to create a global network of country-based cooperative marketplaces.

Photo of a busy traffic intersection. Source: Stocksy

Carsharing platform co-ops offer an alternative to existing corporate "sharing" options. Photo: Stocksy, a platform co-op.

What’s the difference between platform co-ops and platform cooperativism?

The broader movement towards collective, democratic ownership of digital services is called platform cooperativism. It encompasses a wider range of enterprises because it describes a technological, cultural, political, and social transition into the next economy — from one based on shareholder-owned corporations towards one that comprises democratically-owned and controlled enterprises. The goal of platform cooperativism is to bring about more equitable conditions to the online economy, especially in regards to labor standards, transparency, and cultivation of the digital commons.

For example, if a digital services company only gives partial ownership or control to its worker-users, it is not a platform co-op. However, because it’s taking steps to broaden its ownership of its digital platform, the company could be considered as part of the platform cooperativism movement.

How did the platform cooperativism movement start?

Like most movements, it’s a challenge to pinpoint exactly when the concept of platform cooperativism came into existence. The idea came out of an emerging critique of the extractive sharing economy and is the result of numerous people’s work. An early call for a more equitable alternative came at the SHARE conference in San Francisco in 2014, when Janelle Orsi, executive director and co-founder of the Sustainable Economies Law Center, challenged corporate sharing companies to share their ownership and wealth with users.

Later that year, Trebor Scholz, associate professor of culture and media at the Eugene Lang College of the New School for Liberal Arts, coined a term that gave the movement its name in his piece “Platform Cooperativism vs. the Sharing Economy.” Scholz questioned the premise of corporate “sharing” services in which a few owners and investors are the main benefactors. Scholz suggested that instead “developers, in collaboration with local, worker-owned co-ops could design such a self-contained program for mobile phones.”

Scholz wrote:

Let us apply the power of our technological imagination to practice forms of cooperation and collaboration. Worker-owned co-ops could design their own apps-based platforms, fostering truly peer-to-peer ways of providing services and things, and speak truth to the new platform capitalists.

Days later, Nathan Schneider, scholar in residence of media studies at the University of Colorado Boulder, wrote a piece for Shareable about the platform cooperativism trend that he saw unfolding. The piece, “Owning is the New Sharing,” established platform cooperativism as a movement with many concrete examples and introduced it to our global community of readers.

Due to a burgeoning interest in the movement, Scholz and Schneider organized the first Platform Cooperativism conference in Nov. 2015 at The New School in New York City. It brought together a large, diverse group of scholars, programmers, entrepreneurs, policymakers, CEOs, and venture capitalists.

Following the conference, Scholz published a primer on platform cooperativism this year that further defined the concept with its typology and principles surrounding the movement. Schneider and Scholz are also editing a collection of pieces on platform cooperativism by more than 50 contributors. Their book, which is slated to be published in late 2016, is called Ours to Hack and to Own: The Rise of Platform Cooperativism, A New Vision for the Future of Work and a Fairer Internet.

Photo of a person on a tablet device. Source: Stocksy

Platform co-ops bring the longstanding tradition of cooperative enterprises to the online economy. Photo: Stocksy, a platform co-op.

How do platform co-ops differ from corporate internet platforms?

Since platform co-ops are managed and owned by their workers and users, they are more likely to operate in a manner that puts community first. Corporate-internet platforms are legally obligated by bylaws to maximize profit for their shareholder-owners, so they are more likely to act in ways that undermine their users’ interest in pursuit of this purpose.

Due to this difference, there are many ways in which these two types of enterprise would differ. Here are a few ways, most of which were drawn and adapted from Scholz’s primer on platform cooperativism:

  • Decent pay and income security for workers: On a corporate platform, profits are often invested back into the company for further growth. Otherwise, they go to shareholders in the form of dividends, greater salaries, or financial bonuses for the company’s board members. Because co-ops are owned by the workers and users, income security is a top priority. If a co-op is doing well, its worker-owners will decide to pay themselves a fair wage. After accounting for costs and reinvestment in the co-op, any leftover income is usually divided between the worker-owners of the enterprise.

  • Transparency: Most corporate platforms are vague, or even secretive, about how they operate their business. Platform co-ops, on the other hand, are transparent with their users about how they are managed in order to be democratically accountable. They are also likely to be open about how they collect and use data, unlike major corporate services that hide behind obscure, complicated terms of use agreements.

  • Diversity: Corporate digital platforms are often criticized for lacking in diversity, especially in leadership roles, and for not addressing the needs of users from marginalized communities. Because platforms co-ops have collective decision-making processes, all users can voice concerns easily and directly and play a significant role in coming up with solutions.

  • Privacy: Almost all corporate platforms rely on user data to maximize the efficiency and profit of their services, but most of them do little to respect their users’ privacy. Platform co-ops, by the very nature of being owned and democratically-controlled by users, would be obligated to follow procedures that do the utmost to protect privacy. Because privacy is such a critical issue with digital platforms, we've included an extended explanation below.

How would platform co-ops handle user data differently than existing corporate platforms?

There are two key issues in how corporations handle data obtained from their users. First, algorithms can manipulate users’ data in ways that bias and discriminate against them in harmful ways. Second, there can be serious privacy implications regarding when and how much of this data is handed over to unknown third-parties like advertisers or government agencies without judicial warrants or other types of public oversight.

Platform co-ops, by the very nature of being owned and democratically-controlled by users, would be obligated to follow procedures that do the utmost to protect privacy. Sound privacy practices may include the refusal to sell or provide personal data to third-parties unless required to by a warrant and using encryption tools to ensure that data would not be intercepted or lay vulnerable to malicious hacking.

Platform co-ops are owned and governed by the people who participate in and depend on them. Photo: Stocksy, a platform co-op.

Who are platform co-ops for?

Platform co-ops are for anyone who uses the internet or mobile apps for any purpose. As people increasingly rely on the internet for professional, personal, or social reasons, it’s important that its infrastructure is designed to be robust, fair, and secure. Platforms that provide digital services, like websites and apps, are a critical part of the internet’s infrastructure, so it’s important that they are accountable to the people who depend on them.

Entrepreneurs, programmers, and designers who want to create user-centered digital services can look to the platform co-op model to ensure that their enterprises place users and workers at the core.

Who makes decisions in a platform co-op?

Usually, the rules of governance are specified by each co-op’s own bylaws, which are drafted at the time it is founded — these bylaws, however, may evolve over time.

Here are just a few ways platform co-op make decisions:

  • Voting on organizational rules: At Fairmondo, 90 percent of the stakeholders have to agree to change anything about their general principles.

  • Electing the managing board: Co-op employees have a say in electing the managing board. This incentivizes managers to be transparent and receptive to workers’ needs and critiques.

  • Using decision-making tools that enable democratic governance among a large number of users: The collaborative decision-making platform Loomio is used by Wikimedia to gauge the level of consensus among their large number of international community members. It is entirely possible that familiar online voting tools could eventually be adapted to create a seamless, accountable governance structure.

How are platform co-ops created?

Platform co-ops can only emerge out of an ecosystem of tools, institutions, and cultural norms that encourage their creation. New startup platform co-ops can be started from the ground up if they meet an existing need and can easily gain a critical mass of user participants. They can also come out of existing platform co-ops through federation or by spinning off. This is a common practice among offline co-ops. 

For now, the easiest way to build a platform co-op is to start off as a conventional, investor-backed start-up, and then transition to the co-op model. After the founders of an early-to-medium stage company have gotten their platform off the ground, they could arrange a transition in which their users and other stakeholders buy the co-op from them and their investors. Although this means that the platform would start off with a corporate, top-down structure, this process allows the enterprise to first develop a user base that is enthusiastic to oversee and govern the platform into its future.

Specific rules around how to incorporate as a cooperative can vary between countries, or even states or regions. No matter where the co-op is based, it must have a set of bylaws and operating agreements that establish its principles and governance structure. The following resources may be a helpful entry point into getting a platform co-op started:

  • Co-opLaw.org: A collaborative legal resource library created by the Sustainable Economies Law Center (SELC) and the Green-Collar Communities Clinic that is specifically designed for U.S.-based co-ops, and primarily for Californians. The website provides a broad range of definitions, general guides, and sample bylaws for prospective founders to become acquainted with the process of starting a co-op. If you are based in the San Francisco Bay Area, SELC staff members host regular legal cafés where they answer any preliminary questions about starting a platform co-op.

  • The Hive: A website by Co-operatives UK and the Co-operative Bank that gives advice and training on how to start a cooperative or community business in the UK.

  • NZ.Coop on Starting a Co-op: This resource offers ideas on how to start a co-operative business in New Zealand. By becoming a member of NZ Co-Op, you can receive direct advice on the process.

Since the platform cooperative movement is still in its infancy, we welcome readers to weigh in with any insights or resources that will help us develop this explainer. Special thanks to Trebor Scholz, Nathan Schneider and Ambika Kandasamy for contributing to this piece.

Additional reading:

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